The English Court of Appeal has handed down its decision in the case of Standish v Standish [2024] EWCA Civ 567 and the outcome will have far-reaching consequences for the treatment of non-matrimonial property, including for couples with pre-marital assets who married before prenuptial agreements became fashionable.
Whilst the parties broadly agreed that matrimonial assets should be shared, and non-matrimonial assets should not be shared, they disagreed on what makes an asset matrimonial or non-matrimonial, and if an asset had been non-matrimonial, how it could be converted into matrimonial property.
The background
The husband was 71 years old. He was born in the UK but had moved to live in Australia in 1976. He had a successful career in the financial industry and had retired in 2007, 2 years after the marriage. The husband had been married before and had 3 children from his first marriage which was dissolved in Australia.
The wife was born in Australia and was aged 56. She had also been married previously and had 3 children from that marriage.
The husband and wife married in 2005 and had 2 children together. Although the family returned to live in Australia when the husband retired, in 2010 they purchased a substantial home in the UK and the husband, the wife, her 3 children and the parties 2 children moved to the UK and have remained there since.
The marriage came to an end in 2020 after 15 years.
Decision of Mr Justice Moor
The judgment being appealed was by Mr Justice Moor (“the Judge”) who has found that the total wealth was £132 million. Of that, he determined that £112 million was matrimonial and £20 million was non-matrimonial (consisting of a farm in Australia).
Within the matrimonial property were investments of £80 million which the husband had transferred into the sole name of the wife in 2017 (“the 2017 Assets”) and a farming business worth £8.6 million in which the wife had been given shares in 2017. Both transactions putting assets in the wife’s name were part of tax planning schemes and the Judge decided that the assets had therefore been matrimonialised (i.e. converted into matrimonial property).
The husband’s case was that the magnetic factor to determine a fair outcome was his unmatched contribution of wealth when the matrimonial partnership began in 2004. It was argued that all of the assets at the time of the divorce either comprised the husband’s pre-marital property or derived from his pre-marital property. On that basis, the wife’s award should be formulated on the basis of her reasonable needs which were put at £8 million for a house and a Duxbury fund of £10.5 million. Although this totalled £18.5 million, the husband’s offer was that the wife receive £25 million and that he should retain the rest of the assets.
The wife asserted that it was a reasonably straightforward case, and the assets should be divided 50:50. She contended that the pre-marital funds had been mixed, mingled and should be treated as matrimonial assets. She asserted that the marriage was a partnership of equals and while they could have signed a prenuptial agreement to carve out the husband’s pre-acquired wealth, or a post-nuptial agreement at the time of the 2017 transfers, they deliberately did not do so as the husband had asserted “what is mine is yours”.
As for the 2017 Assets, it was submitted that the transfer of them to her “made those assets her separate property, as there could not have been any reserved benefit to the Husband”. The effect of this was that the wife “could have done anything she wished with the money. She could have gambled it all away. If she had placed it in trust, there would have been no possibility of the Husband now seeking it back”.
The Judge decided that there should be a departure from equal sharing because, to a significant extent, the 2017 Assets were pre-marital. Overall, he awarded the husband 66% and the wife 44% (£45 million) of the total wealth.
The decision was reported as ARQ v YAQ [2022] EWFC 128.
Court of Appeal
The parties both appealed and contended, for different reasons, that the Judge failed properly to apply the sharing principle.
The wife’s appeal was focused on the Judge’s failure to recognise that the 2017 Assets and shares in the farm were her separate property. They were not therefore subject to sharing save that the wife had conceded that they should be divided equally because this was a ‘partnership marriage’.
The husband’s appeal was focused on the Judge’s failure to determine that the 2017 Assets and shares in the farm were pre-marital and should not have been treated as having been matrimonialised. He argued that the source of the assets was the critical favour, not the title.
The Court of Appeal undertook a careful analysis of the caselaw starting with White v White when there was a fundamental shift from a needs-based approach to sharing. Lord Justice Moylan considered that the wife’s approach would lead to an unfair result and undermine the sharing principle. Moylan LJ commented that:
“It would place undue weight on legal and beneficial title when this is unlikely, or at least may well not, reflect whether the wealth has been generated during the marriage because experience shows that such wealth will often be largely or significantly in the name of the “money-maker” who remains much more likely to be the husband than the wife”.
He also noted that “I am confident that [the wife’s Counsel] would not be making the same submissions if, for example, all the assets were in the husband’s sole name”.
Moylan LJ specifically addressed the issue of whether the fact that the parties had not entered into a pre-nuptial agreement made a difference and was not persuaded that the absence of a pre-nuptial agreement was of any relevance. He stated “In my view, the judge was right to reject the wife’s submission and decide,at [73], that “the absence of a pre-nuptial agreement is not significant”. The converse is undoubtedly potentially very significant but the fact that the parties did not enter into such an agreement does not impact on the application of the sharing principle”.
The Outcome
The Court of Appeal allowed the husband’s appeal and dismissed the wife’s appeal. The wife’s award of £45 million was substituted with an award of approximately £25 million. The husband received approximately £107 million. The Court of Appeal concluded that the Judge’s application of the sharing principle was flawed and resulted in an unjustified division of the family’s wealth in the wife’s favour. Further, the approach proposed by the wife ran counter to the principles established since White and would undermine the attainment of a fair outcome. Moyland LJ stated that the wife’s case was based on ownership “which is not a good guide to fairness”. He agreed with the Judge that “It has long been clear in this jurisdiction that you cannot benefit from keeping assets in your sole name”.
The difficulty with the outcome was that the Judge did not undertake a needs assessment; he simply concluded that the award of £45 million would comfortably meet the wife’s needs. Therefore, unless the parties could come to an amicable agreement, the matter would have to be remitted for determination of the needs principle.
After the Court of Appeal judgment, the wife’s legal advisors told the press that she intended to appeal the decision to the Supreme Court. For now, parties with pre-acquired wealth may take comfort that the Court will consider the source of the wealth as a magnetic factor in the quest for a fair outcome, so long as needs are met.
The article was originally published on Hong Kong Lawyer
